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 Bouygues said its board would meet on Tuesday to discuss what it
called Altice's "unsolicited offer", adding that no negotiations
between the two sides were underway. "Altice will update the market
in due course," it said.
Neither party disclosed the size of the offer, but sources told
Reuters at the weekend that Patrick Drahi, the controlling
shareholder of Altice, had submitted a bid in recent weeks worth
around 10 billion euros ($11.3 billion) in cash.
Investors cheered the prospect of a merger that would generate
billions in cost savings and - more widely for the sector -
potentially calm a brutal price war that has raged in France since
2012 when low-cost operator Iliad's entered the mobile market.
Shares in Altice and Numericable-SFR were up 21 and 15 percent
respectively by 0834 GMT, while Bouygues jumped 14 percent. French
market leader Orange rose 9 percent, and Iliad 13 percent.
Analysts value Bouygues Telecom at between 5 and 6.5 billion euros,
making Drahi's 10 billion euro bid a generous one for a company that
has been posting losses since Iliad's assault on the mobile market.
The offer is also higher than previous bids for Bouygues Telecom,
including a joint one last year from Orange and Iliad valued at
around 5 billion euros and one from Numericable earlier this year at
8 billion euros.
The entire market value of the Bouygues conglomerate, which includes
businesses in roads, construction, television, as well as telecoms,
stood at 11.3 billion euros before the latest offer was made public.
If completed, the deal would vault Numericable-SFR ahead of
state-backed Orange in terms of subscribers, and take Europe's
third-largest telecoms market from four to three players.
Buying Bouygues would allow Numericable-SFR to reap massive cost
savings by cutting staff and rationalizing stores, among other
measures. Berenberg analysts put the savings at 850 million euros
per year.
POLITICAL ISSUES
But it remains to be seen if the deal will get done, especially
since the billionaire founder of Bouygues Telecom, Martin Bouygues,
has said repeatedly in recent months that he does not want to sell.
There are also political issues for Drahi and Altice to overcome.
The French government has already signaled its opposition to the
proposed deal because of concerns over its impact on investment in
communications infrastructure and employment.
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The state is preparing to auction off 4G mobile spectrum this summer
and the government is counting on raising at least 2.5 billion euros
that has already been earmarked for the military budget.
If Numericable-SFR buys Bouygues, there would be one fewer bidder
for the 700 megahertz spectrum, potentially lowering the proceeds
for the state.
In a separate statement, Numericable-SFR and Iliad confirmed they
were in exclusive talks over selling a portfolio of Bouygues assets
to Iliad if the first deal goes through.
In an effort to calm competition concerns, Iliad would take over
much of Bouygues Telecom's mobile towers and spectrum, two sources
said on Sunday. The companies did not say anything about how
Bouygues' network assets would be valued.
Such an arrangement would be a massive boost for Iliad, which has
been racing to build its mobile network and owns far less mobile
spectrum than its three larger competitors.
Stephane Beyazian, analyst at Raymond James, put the chances of
success for the Altice deal to buy Bouygues Telecom at 50 or 60
percent due to "antitrust risk".
"Bouygues' board will likely accept the offer, in our view, assuming
there is a material cash proportion," said Beyazian. "However, we
also believe that the board will need to consider that they may not
achieve a better value for this asset, even assuming that the
ongoing restructuring plan is successful."
(Editing by Geert De Clercq and Pravin Char)
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